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Federal Liberal government to release tax gap data

Prime Minister Justin Trudeau said the data will be provided in a way that ensures the privacy of Canadians, one of the perceived sticking points in turning over raw tax data to the parliamentary watchdog.

Parliamentary Budget Officer Jean-Denis Frechette is the third PBO to repeatedly ask the CRA for the raw statistical data to be able to calculate the tax gap — the difference between the amount of tax owed to Ottawa and what the federal government actually collects. (Adrian Wyld / THE CANADIAN PRESS file photo)

After five years of stonewalling, the federal government will finally release the data necessary to calculate Canada’s tax gap — the uncollected billions that never make it into public coffers.

In a surprise announcement in the House of Commons Monday, Prime Minister Justin Trudeau said the data will be released to the government’s independent auditor before the end of the month.

“The Canada Revenue Agency and the Parliamentary Budget Officer have reached an agreement that will allow the (PBO) to do the work he has wanted to do for a long time,” Trudeau told the House of Commons.

Trudeau said the data will be provided in a way that ensures the privacy of Canadians, one of the perceived sticking points in turning over raw tax data to the parliamentary watchdog.

The current PBO, Jean-Denis Fréchette, said he has been given no indication the CRA would release the numbers.

“It was a surprise,” Fréchette told the Star. “I’m excited about the announcement. It’s been five years. It’s been a long fight.”

Fréchette is the third PBO to repeatedly ask the CRA for the raw statistical data to be able to calculate the tax gap — the difference between the amount of tax owed to Ottawa and what the federal government actually collects. It’s a number that could top $47 billion per year.

Under the previous government, the CRA refused to calculate the tax gap, dismissing it as unreliable. The Liberal government pledged to start counting the lost tax revenue, and the CRA has released three partial studies to date.

Individuals failed to pay the government $8.7 billion in income tax, according to the CRA. The underground economy costs $4.9 billion in uncollected GST and HST every year, the CRA says.

But when it comes to the tax gap related to offshore tax evasion, an issue thrust into headlines by the Panama and Paradise Papers leaks, the CRA has no estimate.

The best guesses from credible sources place Canada’s tax losses to offshore havens at between $6 billion and $15 billion each year.

In all, more than a dozen western countries — including Australia, Sweden, Poland, Belgium, Portugal, Mexico and Denmark — measure their uncollected taxes to understand the size of their shortfalls and plot public policy strategies to address the problem.

Liberal Sen. Percy Downe, a vocal advocate for tax gap reporting in Canada, first sought out the information from the CRA five years ago.

He was cautious about the news Monday.

“There’s been many false starts with the Canada Revenue Agency,” he said. “The proof is in the pudding. We’ll wait until the PBO actually has the information.”

If the data is released, Downe says, it will be a breakthrough for Canadians’ understanding of how much potential tax income — needed to build roads, schools, hospitals and daycares — is never collected.

“Canadians will finally find out the size of the tax gap that many countries estimate already. We need to determine the size of the tax gap and the government can inform Canadians.”

The Star/CBC investigation traced a long path of denials by the CRA for tax gap data requested by Downe and three straight Parliament Budget Officers between 2012 and 2015.

Fréchette became the third parliamentary budget officer to press for the data when he took the office in late 2013. He wrestled with a $141,000 fee estimate from CRA, along with a six-month timeline, to access the data.

An April 2015 letter from the CRA to Fréchette reads: “Our position is that the PBO does not have the authority to access confidential taxpayer information.”

At one point, Fréchettee mused about taking the CRA to court to access the data.

Downe said it’s important that an independent agency like the PBO be given responsibility to conduct the analysis rather than the CRA doing it.

“We saw too many recent examples from the revenue agency to show, frankly, they can’t be trusted,” he said. “We need an outside, independent agency like the PBO to tell us what the facts are. I think Canadians would find the PBO more trustworthy.”

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